By Jonathan Friedman

July 8, 2010 -- Unless there is a radical change of heart by several council members before Tuesday, there will be a half-cent sales tax measure on the ballot for the Nov. 2 election. A majority of the council endorsed the staff-recommended concept at Tuesday’s meeting. City staff will present a formal measure to the council at next Tuesday’s meeting.

Also, several council members expressed interest in a proposal from education activists who attended the meeting that a non-binding, advisory measure be placed on the ballot stating 50 percent of the estimated $13 million in revenue the sales tax is expected to generate annually would go toward the Santa Monica-Malibu Unified School District (SMMUSD). City Attorney Marsha Moutrie said she would present “legal and practical advice” on this during the next meeting.

A poll conducted by a City consultant last week showed that 64 percent of the public would support the tax measure when presented with information about the City’s fiscal issues. This measure would require one vote more than 50 percent support for passage.

Council member Gleam Davis called the sales tax “a potential to put the city on the right financial footing.” This fiscal year’s budget included a $13.2 million gap between revenues and expenditures prior to adjustments being made. The City was able to balance the budget by making some cuts, increasing fees for certain programs, taking money from the Economic Uncertainty Fund and using cash remaining from the previous fiscal year.

City officials say expenditures will continue to outpace revenues during the next few years. They also fear the State will take money from cities and counties to deal with its own deficit issues.

City Manager Rod Gould said even if the tax were approved, the City would still focus on reducing costs.

“I want to underscore this would not change our posture, which is that we need to continue to pay attention to the expenditure side of the ledger, and to make sure that we are operating as efficiently as we possibly can and look for any possibilities for expenditure reductions while still maintaining critical services,” he said.

Mayor Bobby Shriver, who was the lone vote against placing the measure on the ballot, said he did not think this was possible. “You’re not very likely to cut costs when your revenues increase,” he said.

Shriver continued, “When times are flush, it’s true of all of us, we tend to be a little less disciplined than when times are tight. And I didn’t feel we were as disciplined as we could have been in the budget [for this year]. So I think creating new revenue before we create the discipline is inherently a dangerous game, particularly if we encounter bad economic times again here.”

Mayor Pro Tem Pam O’Connor and Council member Robert Holbrook said the tax would have an additional benefit of helping to maintain the City’s high AAA bond rating. O’Connor noted that rating agencies like to see cities with diversified revenue streams.

“We are losing some of our revenue streams right now,” she said. “This is a way to build a new revenue stream. So it’s not just the money coming in for needed services, it also has to do with that fiscal health going forward, the diversified revenue streams. I think it’s critically important for our future.”

The education advisory measure would not require the council to give the money to the school district, but it would give the council an idea of whether the community is interested in this. The SMMUSD recently had to cut more than $7 million from its budget because of reduced revenue. A parcel tax measure was presented to voters in May, but failed to garner the two-thirds support needed for passage.

The District is considering a new parcel tax for November. The education activists said they would not want to place an SMMUSD tax on the ballot if the City were doing one as well, because this had the potential of killing both measures. But they said they saw potential in a City tax as a method to help the schools.

“While the education community has suffered setbacks in the past year, it’s nice to have a ray of sunshine piercing through the gloom,” said Shari Davis, president of the PTA Council. “And your consideration of a revenue-producing measure is a potential ray of sunshine for many vital City programs, as well as education.”

Shriver said the education activists would be better off placing another parcel tax on the ballot and conduct a “more aggressive campaign” rather than attaching their needs to a hope the City will share its tax revenue. “Then they would own the funding rather than be at the discretion of the City Council,” he said.

Large purchases for items that require registration, such as automobiles, would only be subject to this tax if the buyer is registering the product in Santa Monica. So people who buy a car in Santa Monica but live elsewhere would not have to pay it, while Santa Monica residents who purchase a vehicle in another city would have to pay the tax.

“When times are flush, it’s true of all of us, we tend to be a little less disciplined than when times are tight. And I didn’t feel we were as disciplined as we could have been in the budget [for this year]. So I think creating new revenue before we create the discipline is inherently a dangerous game, particularly if we encounter bad economic times again here.”
       Mayor Bobby Shriver

“I want to underscore this would not change our posture, which is that we need to continue to pay attention to the expenditure side of the ledger, and to make sure that we are operating as efficiently as we possibly can and look for any possibilities for expenditure reductions while still maintaining critical services,”
        City Manager Rod Gould